Trading Psychology – The Universal Law of Confidence in Trading

A trader I work with told me, “If I could be more confident, I would be a good trader.” In response, I asked, “What do you think would make you more confident?” She said, “Make more winning trades.”

Unfortunately, this is the wrong answer. She believes her results will give her the confidence she is looking for. This is what most novice traders think.

Where does real trading confidence come from

Developing solid confidence in your real-time trading skills and abilities doesn’t happen overnight. It’s a process. And we focus on the “accomplishment” process to improve and “be a good trader”. Confidence comes from having the various skills required to read the market, execute and manage trades. Mastering these skills and abilities is the process of trading, and it is this process that brings confidence. Confidence doesn’t really come from more winning trades. In fact, more winning deals come from paying attention to the process.

How to maintain improvement and add confidence

The key to building your confidence and retaining the skills and abilities you’ve developed so far is to understand how we learn. Although we can certainly learn quickly, learning cannot be rushed. This is especially true of the multifaceted skills required in trading. Too often I see traders try a strategy or indicator, have a loss or two, and abandon the strategy like a hot potato. Again, their focus is on results. This wrong thinking will only frustrate you; lasting improvement and true confidence will always be elusive.

Learning is not linear. It doesn’t happen in a straight line. We don’t start at point A and steadily progress to point B. Instead, learning occurs as a series of ups, downs, and plateaus. This is very similar to the swings that occur in an uptrend. We experience spurts of growth and development, retreat a little, advance some more, and then rest a little when we reach a new plateau where we consolidate what we have learned.

Traders with the wrong mindset get excited by upswings, depressed by downswings and saddened by plateaus. Again, their focus is on results. How can anyone develop true confidence on such a roller coaster ride?

Where you can really find confidence in trading

Confidence is found in learning plateaus where our gains are consolidated and our abilities stabilized. Confidence is not found in climbing because it is not our true skill level. The training did not take root. The dips in our learning curve are no place for fear or depression. Fall should be welcomed. why? Because here we learn what we need to become better. Where else can we get this important information? And the plateau is not a place to be bored; they must be savored.

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